Routing and the cost of acceptance

2.1

What a card payment costs

The fee for a card payment has three parts. Interchange goes to the bank that issued the card, the scheme fee to the card scheme — Visa, Mastercard or PROSTIR — and the markup to the acquiring bank. Domestic consumer cards, corporate cards and foreign cards are priced differently.

An agreement shows these parts in one of two ways. A blended rate is one percentage for every card, with the parts hidden inside it. IC++ passes interchange and the scheme fee through at cost and adds an agreed markup, so the price follows the card.

2.2

On-us

A payment is on-us when the bank that issued the card also acquires it. The bank is then on both sides and pays no interchange to another bank. Whether the company sees that saving depends on the agreement: an on-us clause prices such payments separately; without one, the bank keeps the difference.

To route on-us, the platform recognises the issuing bank from the first digits of the card number before it chooses the acquiring. In the demo the card number never leaves the payer’s browser: only the first digits and the last four reach the server. In a live deployment, the way the full number reaches the chosen acquiring is settled under PCI DSS before a pilot.

2.3

How the choice is made

For every online card payment the platform prices the payment at each acquiring the company has an agreement with, then applies the company’s strategy:

• Approval first — the acquirings with the best approval, shared by weight; cost is not considered.
• Least cost — the lowest expected fee for this card under the agreements.
• On-us first — the card’s own bank, if there is an on-us rate with it; otherwise the least cost.

An acquiring whose approval rate is below the company’s threshold is not chosen to save on fees: a declined payment can cost the sale. If none passes the threshold, approval decides. The decision is recorded with every acquiring considered — its expected fee, its approval rate, on-us and the threshold check.

2.4

Trying a strategy on past payments

Because every decision is recorded with its alternatives, a strategy can be tried on past payments before it is chosen: the same payments go through the same routing under another strategy, at the same prices. A change of strategy is a policy of the company, recorded with its date and the role that set it.

2.5

Where routing does not reach: the tills

Payments at the tills go through the terminals of the bank each region works with; the platform does not route them. The banks’ settlement reports still reach it, with the issuing bank and card type of every payment. They show, region by region, the share of the terminal bank’s own cards and what an on-us clause or another terminal bank would cost.

The work here is commercial: an on-us clause, IC++ instead of a blended rate, or another terminal bank. The platform gives the figures for the conversation with the bank and then checks every settlement against what was agreed.

2.6

Beyond cards

Instant transfers, account-to-account payments and QR payments carry no interchange; in the demo their cost is a fixed fee per transfer. Instalments cost more than a card and are offered where they suit the basket. Bonus points go through the company’s own bonus system and cost nothing to accept.

2.7

Who decides

The strategy, the threshold and each region’s terminal bank are policies of the company, set by the payments manager and recorded with their dates. The routing agent watches the decisions and the banks’ reports and proposes changes with a replay attached; a person accepts or declines. Commercial questions are proposed with the figures for the conversation with the bank.